Hotel major ITC on Tuesday sought a waiver of the norms regarding minority shareholders in its case against Hotel Leelaventure in which it owns less than the mandated 10 percent.
The ITC counsel told the tribunal comprising VP Singh and R Duraisamy that as of now they hold only 8.72 percent in Hotel Leelaventure, which Canadian private equity fund Brookfield has agreed to take over for Rs 3,950 crore but that was because a part of its shareholding was converted into equity after the banks sold their loans to JM Financial ARC, which did the debt-equity conversion.
The Company Act provisions recongnise only those with 10 percent or more non-promoters as minority shareholders.
Before JM Financial ARC converted its debt into equity, ITC had held 11.78 percent in the rival hotel company, which has been in financial crisis for long now. Brookfield, the promoters along with JM Financial ARC, which owns 26 percent after debt conversion, are proposing to sell 96.8 percent of the company.
After the sale, ITC alleged that large amounts will be paid to the promoters and JM Financial ARC will also benefit from the deal but the company will not receive any value.
Since other minority shareholders have very low shareholding in Leela now, they don't have the capacity to maintain a petition of oppression and mismanagement, therefore, ITC filed the case, it argued.
He said, ITC wants a waiver of the minimum 10 percent shareholding requirement clause for any minority shareholder to file a petition for oppression and miss-management against the management. And if Sebi decides to give a go ahead to the deal, they can fight the case on its merit in NCLT, he added.
To this, the Leela counsel said this is a grossly motivated and mala-fide move of a business rival which is trying to kill competition by taking over the company.
The value of their shareholding is negative as of now and they knew about the corporate debt restructuring scheme and JM's conversion of debt to equity but didn't oppose it as they abstained from voting on those issues, he added.
The tribunal will continue to hear the matter Wednesday.
Earlier ITC and LIC, which owns 2 percent in Leela had moved the Sebi seeking to stay the deal with Brookfield saying the Rs 3,950-crore will leave the holding company a skeleton as deal involves selling all the four key properties of Leela in Delhi, Udaipur Chennai and Bengaluru, and land parcel in Agra leaving only the Mumbai property, which anyway is under dispute with the Airports Authority over land ownership.Following this, Sebi asked Leela and JM Financial ARC to put the deal, announced on March 18, on hold.